China's Uncertain Course

Assessments of Beijing's future clouded by unease over how it will handle Taiwan, Hong Kong

July 1, 1993

By John Hughes

THROUGHOUT the length and breadth of Asia and the Pacific basin, one imponderable exercises the thinking of government leaders, politicians, businessmen, military experts, and other policymakers.

It is China and the unpredictability of its future course.

Sixty percent of the world's people live in Asia. While there are pockets of poverty, and repressive communist regimes continue to exist, much of it is exploding with economic vitality and a new sense of freedom.

If, as many predict, the 21st century is to be the century of Asia, China's direction will determine whether those years will be filled with continuing economic progress, whether they will be peaceful or defiled by conflict.

On the one hand, China is experiencing astonishing economic growth. Recent projections of the World Bank and the International Monetary Fund see China's economy looming as the world's third or fourth largest. Development is taking place mainly in the southeast coastal provinces of Guangdong, Fujian, and parts of Zhejiang. This development is fueled by investment from, and trade with, the thriving free-market economies of Hong Kong and Taiwan.

Guangdong's economy, for instance, has been exploding with an annual growth rate of 12 percent. Indeed, these free-wheeling coastal provinces of a theoretically communist state have become economically interlocked with the blatantly capitalist territories that lie across from them on China's borders.

Beijing can preach what political ideology it likes, but southeastern China is busy making very non-Marxist and non-socialist profits in a market encompassing Hong Kong and Taiwan, which is now being referred to by economists as "Greater China."

This is fine with China's effective leader, who has encouraged economic but not political reform. But Deng Xiaoping is in his late 80s and nobody knows what the succession will bring. The possibilities range from a continuation of his economic policies to chaos and civil war with enormous negative consequences for China's economy.

Much hinges on whether politics or economics will prevail in China's handling of two sensitive areas: Hong Kong and Taiwan.

Hong Kong, currently a British colony, is due to revert to China's ownership in 1997. Beijing has pledged to let Hong Kong's thriving laissez faire economy continue. But if new leaders in Beijing go back on that promise and cannot resist the temptation to crack down politically on Hong Kong, investors would flee both from Hong Kong and Guangdong.

Similarly, Taiwan is a test for Beijing. Officially, Beijing's position is that Taiwan is part of China. In fact, Taiwan is a separate entity that has thrived under the free-market system and guards its separate identity militantly. Although previous governments on Taiwan have resisted contacts with the mainland, economic reform in China has attracted Taiwan investors, who have pumped between $3 billion and $4 billion a year into mainland enterprises in the past couple of years. Trade also has boomed, an d economists estimate that about 8 percent of Taiwan's exports are now going to China, with another 19 percent going to Hong Kong, an unknown proportion of which also flow through to China.

While China accepts, even encourages, these economic ties with Taiwan at present, the mood in Beijing could change, especially under new leadership. China could freeze this trade and investment in an attempt to exert political leverage over Taiwan. In a worst-case scenario, China could even take military action against Taiwan in a bid to bring it under Beijing's rule.

The position is made more complex by recent political developments in Taiwan. In a process of political liberalization, the opposition Democratic Progressive Party won about a third of the seats in the Legislative Yuan, thus providing a platform for those who advocate the formal independence of Taiwan. Should such a platform become official policy, Beijing would regard this as highly provocative, and its reaction is unpredictable.

Against this backdrop, experts who have talked recently with China's leading strategists believe that China is implementing a more assertive foreign policy in Southeast Asia. This goes in tandem with a policy of military modernization. From Russia the Chinese are acquiring 24 Su-27 fighter-bombers. There are reports of additional purchases of this aircraft, along with consideration of MiG-31s. The Chinese are getting air-defense systems from Israel and in-flight refueling equipment from Iran. They are bu ilding modern frigates and destroyers and talking of acquiring an aircraft carrier, although American military experts think it would take the Chinese several years to become proficient in operating aircraft from carriers. A more likely prospect, they say, is the purchase of a smaller carrier from which assault helicopters could operate. The Chinese are also building an airstrip in the Paracel Islands they seized in 1974 from South Vietnam.

To keep its economy developing and to feed its people, China needs oil, rice, and fish. It has not escaped the notice of China's neighbors in Southeast Asia that they have what China wants. This is another factor that makes for uncertainty as the peoples of Asia and the Pacific weigh China's intentions.

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